More brands are jumping on the food-truck trend, newcomers and veterans alike. Added revenue is the obvious draw, but it’s tricky to offset fuel and labor costs, and maneuver differing rules and regulations.
Armadas of food trucks are popping up everywhere from busy downtown business districts to local street fairs. Now more franchisors from start-ups to established brands are looking to get in on the mobile phenomenon.
Food trucks are a key part of the business model for newcomers such as Bee & Tea and Sweet Arleen’s, while even franchisees for much larger companies such as Pita Pit and Auntie Anne’s are testing the waters. Auntie Anne’s introduced its first food truck in August 2013 in Fort Wayne, Indiana, and has since added two additional franchisee-owned trucks. Pita Pit franchisees operate a half-dozen mobile vehicles in cities such as Nashville and Mobile, Alabama.
Some franchisees view food trucks as a great option to expand beyond the typical shopping center or mall location to reach new customers and venues. Others are intrigued by opportunities that exist in the growing food truck industry. A recent University of Michigan and Northwestern University study found more than 4,000 food trucks are operating in cities that are home to more than 100,000 people.
"We have had food delivery forever, but the food truck is a great option," says Arleen Scavone, CEO and founder of Sweet Arleen’s, a California-based cupcake franchise. Food trucks are a key part of the growth strategy for Sweet Arleen’s. The company opened its first retail location in Westlake Village, California, in November 2009. At that time, food trucks were gaining popularity across Southern California.
Sweet Arleen’s had gained recognition from being on the "Cupcake Wars" TV show on the Food Network. And with its first bakery and retail location open, the company was getting calls to attend a variety of events. So, Scavone thought it was an ideal time to build a mobile food truck into her franchise model. The company introduced its food truck in 2011 and started franchising in 2013. The Sweet Arleen’s franchise model now consists of a central hub, a bakery and retail location, along with additional spokes than can sit in smaller retail outlets and/or an optional food truck.
Sweet Arleen’s has one corporate truck in operation out of its Westlake Village location that is licensed or permitted in Los Angeles, Santa Barbara and Ventura County. The truck has been generating about 20 to 30 percent of monthly sales for that hub location, which bakes about 10,000 cupcakes each week.
Franchisors and franchisees alike are drawn to the advantages food trucks offer, such as greater visibility and added revenue. "There are a lot more opportunities beyond the normal retail hours that a store would be open to run your food trucks, essentially 24-7, and there is demand to have those food trucks out," Scavone says.
In addition to the public events, Sweet Arleen’s books its food truck at private events such as corporate functions, weddings and birthday parties. The mobile unit gives the brand a much greater reach than just a 20-mile radius that a typical retail storefront might draw, she says.
The food trucks also allow franchisees to add an additional retail unit at a significantly reduced cost. The cost of opening a hub with a full bakery and retail store component can range between $250,000 and $350,000, while the start-up cost of a mobile truck at Sweet Arleen’s is in the low $100,000s.
Jason Sorrells has been a Maui Wowi Hawaiian franchisee since 2002. He has nine mobile carts & kiosks that he operates across the Dallas metro at different venues such as the convention center, as well as sporting events and concerts. He added a full-size, 25-foot food truck in April 2013. "Logistics-wise, it just made sense," says Sorrells. So, along with Maui Wowi’s approval and guidance, he did his research and sourced out the build-out of the truck. The start-up cost was about $80,000.
"We do the same local events and festivals; it is just a bigger presence and a bigger footprint with the truck," says Sorrells. Sales also are potentially bigger. Truck sales at weekend events can generate two to three times the sales revenue of a cart. Those higher sales are offset somewhat by higher operating costs, such as fuel costs and additional staffing as the truck can accommodate four or even five people.
One of the big drivers for Sorrells was the convenience. Set-up and tear-down at a venue is much easier with a food truck, because the trucks are fully stocked and self-contained. His truck is equipped with a sink to wash dishes and it has more space for storage and extra inventory for making Maui Wowi coffee and smoothies. The truck also can provide its own power from its diesel fuel if electric hook-ups are not available.
Some franchisors remain reserved about the growth potential for food trucks across the broader franchise sector. One of the challenges of food trucks is the learning curve. Franchisees have to research what each city allows in terms of permitting, licenses, fees and other requirements.
Food trucks represent only about 1 percent of the franchise locations for Pita Pit, which has some 500 locations across the U.S. "We are not opposed to people doing them, but we certainly wouldn’t make it a primary focus of our business," says Bill Wilfong, vice president of franchise development for Pita Pit in Coeur d’Alene, Idaho. The company does not sell a franchise for just the food truck on its own. Food trucks are meant to bring in additional sales for an existing brick-and-mortar store.
Franchisors also need to be mindful of possible conflicts that food trucks might create with territory and multi-zone agreements. For example, if a food truck operator starts out as the only franchisee in their territory, they get used to taking that truck wherever they want. "As soon as you put another franchisee in, then all of a sudden you have an issue with territorial rights," says Wilfong. "So, we are careful with them."